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Citigroup Hit With $3 Million Fine for Failure to Supervise ETF Sales

Citigroup Global Markets Inc., (Citigroup) submitted a Letter of Acceptance, Waiver and Consent in which the firm consented to, but it did not admit to or deny, the described sanctions and the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that it failed to deliver prospectuses with respect to the sales of exchange-traded funds (ETFs) to its investor customers.

According to FINRA, Citigroup failed to deliver prospectuses for nearly 255,000 investor purchases of approximately 160 ETFs over a three-month period. Further, FINRA found that from 2009 through April 2011, Citigroup may have failed to deliver prospectuses for more than 1.5 million purchases of ETFs by investors. Moreover, Citigroup’s supervisory system failed to achieve compliance with Federal securities laws with regard to prospectus-delivery requirements, especially since the firm allegedly detected certain failures back in 2009.

According to Susan L. Merrill, former FINRA Executive Vice President and Chief of Enforcement, “When a firm fails to provide prospectuses and other offering documents, it deprives the investing public of information valuable in making informed investment decisions.” Consequently, Citigroup consented to the sanction of a $3 million fine, to be paid jointly to FINRA and the New York Stock Exchange.

Supervision within a brokerage firm can take many different forms, and management’s failure on any front, including the failure to deliver ETF prospectuses, can create grounds for a claim. Among other areas, management should have appropriate supervisory processes in place for the regular review of investor accounts, quality checks to see that the right products are being recommended and delivered to investors, and audits to ensure continual compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures.

Have you suffered losses in your Citigroup investment account? Did you purchase an exchange traded fund and fail to receive the prospectus or other offering documents? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 33 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.